Some student loan borrowers who ride the Reddit-powered GameStop (GME) wave are betting that they will be able to use the profits to pay off their debts.
“I can not think of anything I’ve seen that is nearly as insane as what’s going on with GameStop right now, ‘Loop Capital Markets analyst Anthony Chukumba told Yahoo Finance Live (video above).
Shares of the video game retailer have risen more than 130% in recent days before falling dramatically during afternoon trading on Monday. The rise in equities began after short sellers and Reddit users on r / wallstreetbets (WSB) clashed over the direction of the stock.
“I love you guys,” one WSB user posted, along with a screenshot of his $ 23,504.45 consolidated student loan scheduled for Monday, January 25th. student loans ”and added that they never” thought I would pay so soon. “
The user, a 28-year-old American from the South, who has a BFA in graphic design and asked for privacy reasons not to be identified, told Yahoo Finance that they will start paying attention to GameStop and weekly calls in November. started buying before making about $ 80,000 last week.
When asked why they did not pursue the expected student debt forgiveness during the Biden administration, they replied: ‘I do not believe that the current administration is going to do anything about student debt … getting rid of the debt was for me more important. ”
On Twitter, Dylan Steele, a student at Valdosta State University and a manager at a fitness chain in Georgia, also said he plans to use his GME profits to pay off his student loans.
In an email to Yahoo Finance, he said he only bought shares on January 20 and sold them on January 25 for a profit of about $ 9,000.
“I currently have about $ 12,000 in student debt. I plan to pay it off before August with the majority due to this unexpected windfall,” he explained, adding that he plans to go into law after the summer. to go to school.
Another user, who has not yet paid out money to pay off their student loans, also expresses joy at his profit and at the fact that it may soon be debt free thanks to the stock.
‘Playing with stocks is risky’
Other Reddit users are considering spending their student loans to buy GME shares.
According to the certification statement on the Form Free Application for Federal Student Aid, the student who submits it must agree to use the federal and / or state financial aid “only to pay the costs of attending the university”.
“You should only use the funds for the cost of training … it absolutely does not mean stock purchases and credit card payments,” Betsy Mayotte, president and founder of The Institute of Student Loan Advisors (TISLA), told Yahoo. Finance. Mayotte added that the shares with student loan money could lead to complications if the user initiates bankruptcy proceedings.
Another user also said that they put ‘all my student loan money’ in GameStop and Palantir. Others regretted afterwards that they had not considered a similar step.
i’m dumbfounded, wish i bought some GME last week when it first started. could I have my student loans swept away 😂
– ˜ ”* ° •. 乇 ㄚ ㄥ 乇. • ° * ”(@Khillsbro) 25 January 2021
According to the trend, some experts are “concerned about the state of the market that is buying too much,” Travis Hornsby, founder of Student Loan Planner, told Yahoo Finance. “If the Federal Reserve does something about interest rates, or President Biden’s stimulus overheats the economy and raises interest rates, these children will be destroyed.”
And, “my advice is that I understand that an investor who has earned their money ten times this year probably thinks that personal finance experts like me are idiots,” he added. ‘But consider selling only your original investment and letting the rest run its course. People with a big profit are just like the friend at your bachelor who has been beaten five times at roulette and feels unstoppable. Take some off the table and if it keeps rising, you will still be rich. If it at least crashes, you have not lost. ‘
Mayotte also advised caution.
“I mean, if you make money, how you make it, whether it’s the stock market, or the lottery, and you use it to pay off your student loans … that’s a good thing,” she said. “But people do not necessarily have to play the stock market to pay off their student loans … it’s risky to play with stocks.”
The markets continue to exacerbate the rapid movements: the stock fluctuated wildly on Monday, rising by more than 100% before being negative and then jumping back by more than 20% on the day.
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Aarthi is a reporter for Yahoo Finance. She can be reached at [email protected]. Follow her on Twitter @aarthiswami.
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